The Lesson You Never Forget

Mike Hofman was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City.

Even when you're a high-end prestige-service provider with rich customers, price matters. Take, for example, Auto Glass Plus (AGP) in Carrollton, Tex., which replaces car windshields through its 13 stores in 10 cities in 5 states. Because the $12-million company has kept a customer database since its inception, in 1994, it knows its target audience: affluent suburbanites who are not thought to be price sensitive.

AGP's managers believed service was more important to their customers than the lowest prices. So they built a robust order-tracking system that enables drivers to complete 15% more jobs a day, as well as deliver on the company's promise to arrive at appointments on time. "We have a lot of brand equity and awareness in our markets," CEO Kris Horner says. "In fact, in St. Louis, a driver once had a school bus pull up next to him at a light and all of the kids sang the Auto Glass Plus jingle, complete with the phone number."

To keep an eye on pricing, AGP has regularly conducted price surveys in each of its markets. In 1998 a St. Louis competitor reduced its prices by 5%. AGP noticed the decrease but didn't respond. Soon, St. Louis sales slipped by 15%. "Our average sale price was $210, which we didn't think would bother our customers, because of our great service and marketing," Horner says. "What we failed to realize was that customers don't think about auto glass every day, like we do. Just because they know us doesn't mean they're not going to shop around when they have a crack in their windshield. As soon as we lowered our average price to $200, our sales jumped up again. We never used to worry about a 5% difference. Now we do."